Among the many lessons to be learned from the Covid-19 crisis, the inadequacy of the current framework on VAT rates was emphasised by the Head of Unit Value Added Tax of the Commission’s Directorate-General for Taxation and Customs Union (TAXUD), Patrice Pillet, at an online conference organised by the European Tax Adviser Federation (ETAF) on Tuesday 30 June.
In an attempt to mitigate the impact of the economic crisis caused by the Covid-19 pandemic, several Member States have indeed resorted to fiscal measures, such as the introduction of reduced VAT rates for medical and protective devices, or the temporary reduction of VAT to support consumption, as in Germany.
However, in this context, the current EU framework has posed several difficulties for Member States, explained Mr Pillet, and the Commission’s 2018 proposal to give member states the freedom to set reduced, super-reduced and zero VAT rates (see EUROPE 11940/15) “would have been necessary to tackle the crisis”, he said.
At present, the VAT Directive contains an annex listing the products and services that may be subject to reduced rates. Instead of a positive list of products and services eligible for reduced rates, the Commission proposed a negative list of products and services that could not be subject to reduced rates, such as alcohol or tobacco, for example.
Negotiations on this proposal – which is linked to the implementation of the definitive VAT regime (see EUROPE 11876/15) – have been “very slow”, Mr Pillet regretted, mentioning a “certain degree of resistance” on the part of the EU Council.
Abandoning the straitjacket of unanimous decision-making
Another lesson to be learned from the crisis, he said, is that the EU is still too slow to adopt its tax legislation because of the unanimity rule in the EU Council. “Even more than in the past, it is necessary to move to qualified majority voting in order to have more effective and faster European legislation”, he said.
Asked about the use of the ‘passerelle clause’ (Article 116 of the TFEU) to move to qualified majority voting, Mr Pillet confirmed that nothing in the European treaties prohibits its application to taxation and confirmed that the Commission is currently studying (see EUROPE 12429/17) to which situations it could be applied in practice. (Original version in French by Marion Fontana)